Free Debt Settlement Offer Letter

A Debt Settlement Offer Letter documents an offer; usually, the debtor sends it to a creditor in hopes that the creditor will accept the terms of the offer. The debtor is looking to settle the debt at a level below what is owed to the creditor.

The debtor is usually in a situation where they cannot repay the debt and offer a reasonable portion of the debt in exchange for the creditor closing the account in full.

How to Write a Debt Settlement Offer Letter?

There are steps that a debtor should follow if they plan to write a debt settlement offer letter to their creditor. Debtors should decide if they want to write the letter on their own or hire professionals to help with negotiations in exchange for fees that can be expensive.

Debtors should also decide how much they will offer, and it is a good idea to have these funds saved up to enable payment once the settlement offer is finalized.

Write the letter to your creditor and describe your situation, what you can pay and what you expect in return. This is part of the negotiation that will hopefully end in an agreement. You may be asking that the account be shown paid in full and missed payments are removed.

Tip: It is good to always ask for a written confirmation of the agreement before sending the payment. This confirmation is evidence that you reached an agreement that both parties support.

Finally, once you are satisfied with the agreement and have your confirmation, send your payment. Stay in touch with your creditor until all terms of the agreement have been finalized.

What to Include in a Debt Settlement Offer Letter?

Some basic things must be included in your debt settlement offer letter. These include:

  • Your personal information
  • Your account number
  • The amount you can pay
  • Your expectations in return for payment

The last two points form the basis for the negotiations with your creditor. In addition to the above, you must explain why you cannot repay the debt in full. Examples may include:

  • Financial hardship due to serious injury
  • Loss of employment
  • Environmental disaster

Note: Debtors should expect to provide evidence of the hardship. For example, if you are injured and cannot work, proof from a doctor may be required.

Tips and Things to Avoid

  • Keep all of your correspondence professional.
  • Save sufficient money to cover your proposal since the offer may be accepted and payment required immediately.
  • The creditor may accept this offer, or they may propose a counter offer.
  • The creditor may also request proof of hardship. Be prepared to negotiate the terms of the agreement.
  • Ask for written confirmation of the agreement from the creditor before making your payment.
  • Discussing your situation with your creditor can reduce your stress and also avoid debt collection issues and more severe reports to your credit report.
  • If your debt settlement agreement fails, you can owe more than you did initially, .e.g. court fees, missed payments, and late fees.
  • The debt settlement may show up on your credit report and negatively impact future opportunities to be approved for loans.
  • Decide if you want to use professionals to assist with negotiations; however, their fees can be expensive and add to your debt if the debt negotiation fails.

Formatting Your Debt Settlement Offer Letter

Your proposal should include a response date in the letter to encourage a prompt reply. Make sure you have the proposed amount available to pay the creditor if the creditor accepts the offer. Request confirmation of payment once you send in your payment.

After a reasonable time, check your credit report to confirm this debt has been removed from your credit report. Although the debt may be removed, a debt settlement action will be reflected on the report, which many creditors consider liability for future loans.

Take the time to craft a well-thought-out letter. A good letter, with the facts and accurate information, can make a difference in swaying the creditor to accept your offer. It also helps to ensure that both parties support their part of the agreement.

Debt Settlement Offer Letter – Format

Your Name, address, and Phone number

Account Number


Creditors Name, address, phone number


Body – Paragraph 1 – Introduction

Body – Paragraph 2 – Your proposal

Body – Paragraph 3 – Next Steps


Your Signature

Printed Name

Sample Debt Settlement Offer Letter

John Doe

124 Apple Lane

AppleCity, CO


[Account Number]


[Creditors Name, ]

[Address, ]

[Phone number]

Dear [Sir/Mrs./Madam]

I am writing this letter to discuss the debt on the above-mentioned account. I have experienced financial hardship due to [cause of financial hardship] and I am unable to repay the debt on this account in full. [Explain the financial hardship, job loss, etc.]

I am proposing to settle this debt for [state the amount you can repay] as a final settlement. I am also requesting that [state other requests] [late payment removal, late payment records from credit report, freedom from liability of this debt from this account]. The credit report should reflect the account is fully paid in full.

Please accept this offer and send a signed written agreement. I will be happy to pay the agreed-to amount within [xx] days of receiving your agreement. Please advise by [specified date].


[Your Signature]

[Printed Name]

Debt Settlement Offer Letter (Word Template)

Debt Settlement Offer Letter


A debt settlement offer can be a reasonable approach to deal with debt that you are unable to repay due to financial hardship caused by lack of employment, health issues, and other possible issues. This letter represents your proposal to the creditor. The creditor may accept this offer or they may propose a counter offer. The creditor may also request proof of hardship. Be prepared to negotiate the terms of the agreement. Always request confirmation in writing before sending the agreed-to payment.

There may be a negative impact on your credit score and future lenders may not be willing to offer loans based on a debt settlement record on your credit report.

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